Key Asian cities set to see construction tender prices rise

Construction tender prices in key Asian cities are likely to rise this year as the economy recovers and building activity picks up.

According to a report by property and construction consultancy Rider Levett Bucknall (RLB): ‘Barring any unforeseen change in global market conditions for the year 2010, Asian construction demand is expected to rebound in tandem with a revival of property development.

‘Coupled with an expected rise in commodity prices, construction tender prices are anticipated to register moderate increases for key Asian cities in 2010 compared with the previous year.’

In Singapore, RLB estimates that building tender prices could rise 3 per cent this year, reversing a 19 per cent slide in 2009.

Higher construction costs have a part to play in this. According to a recent report by quantity surveyors Davis Langdon & Seah, the recent rise in iron ore prices is likely to lead to higher steel prices. The upcoming increase in the foreign workers levy and cut in man-year entitlement will also cause construction costs to go up.

RLB recognises that contractors’ costs are set to grow because of these changes. But it does not expect tender prices to surge as a result. Tendering margins ‘are anticipated to remain competitive due to the relatively low construction demand’.

The Building and Construction Authority (BCA) projects this year’s total construction demand at $21-27 billion. This is not far from last year’s demand of $21 billion, but is much lower than the demand of $35.7 billion in 2008.

In Beijing, Shanghai and Shenzhen, construction tender prices could rise 3 per cent this year, RLB says. They remained flat in 2009.

China’s booming property market has contributed to higher construction demand. While Beijing has tried to rein in speculation with measures to cool the market, RLB believes ‘it is unlikely that such measures will have an immediate effect on construction costs’.

Of the 10 Asian cities RLB looked at, Hong Kong could register the biggest percentage increase in building tender prices.

RLB expects these prices to grow 9 per cent this year, reversing a 6 per cent drop in 2009. The construction industry there will benefit over the next 2-3 years with the start of major railway projects, it says.

Source: Business Times, 19 Apr 2010